Because of higher interest rates, zero-coupon bonds are sold at a premium price above the face value that will be paid at maturity.

Question

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Zero-coupon bonds are sold at a discount price below the face value, as investors are not being paid any interest during the life of the bond. Therefore, as interest rates increase, the price of zero-coupon bonds decreases, and they are sold at a discount to compensate for the lack of interest payments.

Because of Higher Interest Rates, Zero-Coupon Bonds Are Sold at a Premium